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Ritchie Brothers Auctioneers Inc (RBA 0.58%)
Q3Â 2019 Earnings Call
Nov 8, 2019, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning. My name is Chris and I will be your conference operator today. At this time I would like to welcome everyone to the Ritchie Bros. Auctioneers Third Quarter Conference Call. [Operator Instructions] I will now turn the call over to Mr. Zaheed Mawani of Investor Relations to open the conference call. Mr. Mawani you may begin your conference.
Zaheed Mawani -- Interim Co- Chief Executive Officer And President of International
Thank you Chris and good morning and thank you for joining us on today's call to discuss our third quarter 2019 results. Joining me today are Sharon Driscoll and Karl Werner our Interim Co-Chief Executive Officers along with other members of management who will be available for the Q&A portion of the call. The following discussion will include forward-looking statements. Comments that are not a statement of fact including projections of future earnings revenue gross transaction value and other items are considered forward-looking and involve risks and uncertainties.
These risks and uncertainties that could cause our actual financial and operating results to differ significantly from our corporate statements are detailed in our sec and Canadian securities filings available on our Investor Relations website and investor Richie brothers. com. We encourage you to review our earnings release and form 10 to which are available on our website as well as at parents leader. on this call, we will discuss certain non GAAP financial measures for the identification of non dfghth financial measures. The most directly comparable gap financial measure and reconciliation between the two see our earnings release informed MQ presentation slides accompany our commentary today. The slides can be viewed to our live or recorded webcast or downloaded from our website. All fingers discussed today on today's call or in US dollars unless otherwise indicated.
I'll now turn the call over to Sharon Driscoll. Sharon?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
Thank you Zaheed. Good morning everyone and thank you for joining our third quarter earnings call. Our solid results in the quarter reflect continued progress against our strategy to provide multichannel solutions for buyers and sellers in all segments of the used-equipment market. We are very pleased with the progress on our strategic initiatives and particularly with the performance in our U.S. region and with our global online growth. We continue to make good progress in the quarter with our MARS implementation and our RB Asset Solution products and services along with our Marketplace-E solution is resonating very well with customers. This quarter highlights the solid execution by our sales and operations teams to deliver positive results for our consignors particularly at a time when global markets faced heightened economic and political pressures. Before we jump into the quarter I want to take this opportunity on behalf of both Carl and I to thank all of our team members globally for their tremendous energy and commitment in the quarter to deliver these results.
We delivered 18% total revenue growth with a 28% improvement in adjusted diluted earnings per share and generated greater than 200% increases in our operating free cash flow. These results were led by the strength of our 5% ggV volume growth on a constant currency basis and stronger guaranteed contract rate performance NC revenues which contributed to our 11% service revenue growth in the quarter. Our online ggV had robust growth of 37% led by marketplace he delivering another tremendous quarter of growth 56% over last year, along with strong iron planet weekly options and over 120% growth in the planet. Another highlight in the quarter was the great work from our Richie brothers Financial Services team which produces 31st consecutive quarters double digit revenue growth at a very strong 29%. Our results were unfavorably impacted by a 3% ggV decline in our live auction channel and lower year over year inventory profit rate performance.
The live auction ggV decline was driven by a few factors. First a shift in our martech Netherlands option to q2 of this year, coupled with challenging environments within the global agriculture and energy sectors. regionally, our US team had an impressive quarter, delivering double digit total GDP growth, led by strong online performances from each of marketplace IE iron planet weekly and Gulf planet, together with high single digit growth in live industrial options. The headline story for our Canadian business was slightly less positive, as we experienced ggV decline resulting primarily from the weakness in the agriculture sector. And general uncertainty for industrial designers primarily in Western Canada leading into the federal election. The agriculture weakness was driven by lower end commodity prices, international trade uncertainty and unfavorable weather affecting harvest timing and leading to a different set of equipment consignments. All in we held 13 fewer on the farm options in candidate versus last year's third quarter, and saw softer agriculture performance that our live events.
Notably however we are already seeing a more positive story unfold and good early momentum in Q4 with booked volumes from on-the-farm auctions significantly up over last year. GTV in our international group declined in the quarter and was heavily impacted by the decline in the euro versus the U.S. dollar. Excluding the significant unfavorable impact of foreign exchange international was flat till last year despite the shift of the Moerdijk auction into the second quarter and the softness in the Middle East. Finally our international group posted another strong Marketplace-E performance with GTV growth in the quarter up 148%. I wanted to add that our operational metrics remain strong and we are encouraged by our increases in the number of listed items and total number of overall bidders.
And overall in the market as it relates used construction equipment supply OEM production levels appear to have caught up to new equipment demand and large strategic accounts are shifting their focus toward inventory management which could indicate further loosening of equipment supply in the near to midterm. Additionally in the transportation sector we have seen more assets come to market and coupled with some weakness in demand has led to pricing pressure on those assets in certain markets. The impacts to supply will vary by geography as consignors navigate such factors as the U.S.-China trade deal Brexit the results of the federal elections in Canada and a moderating economy in the U.S. Looking ahead we remain cautiously optimistic about the used-equipment supply. And as we have said in the past we do not expect to see a slide of equipment all at once but more a general improvement as we go into Q4 in 2020. We are collectively focused on keeping the momentum going as we drive our business forward and stay focused on our long-term growth initiatives.
I will now turn to the financial highlights. Our total revenue improvements of 18% was driven by both a 32% growth in inventory sales revenue and an 11% increase in service revenue. Commission revenues increased 4% in line with GTV growth and strong guaranteed contract rate performance. Fee revenues were up 19% in the quarter as a result of higher GTV volume the impact of our fee harmonization and a higher mix of lower value lots. RBFS also contributed to fee revenue growth in the quarter with their strong performance. The 32% growth in revenue from inventory sales was primarily due to a higher level of inventory deals transacted in the U.S. region and GovPlanet inventory sales revenue from our government surplus contracts.
Our operating income on an adjusted basis excluding the onetime severance costs related to acquisition synergy actions in the third quarter of last year was up 23% driven by our total revenue growth and operating leverage with our SG&A growth -- costs growing at about half the rate of service revenue growth. Net income on an adjusted basis which excludes the nonoperating gain on the sale of an equity investment in Q3 of last year improved 31% from both higher operating income and lower interest expenses. Turning to our Auctions and Marketplaces segment. Service revenue was up 12% in the quarter. Regionally the U.S. posted 90% service revenue growth led by strong live and online GTV growth including higher volume from our strategic accounts strong growth from GovPlanet as well as higher fee revenues.
Canada was up 2% on higher fee revenue from the fee harmonization and increase in lower value lots resulting in higher per lot fee rates and a 300 basis point year-over-year improvement in our guarantee commission's rate from our industrial live auctions. This was partially offset by the significantly lower activity in the Canadian agriculture sector as mentioned earlier in my comments. Our international service revenue decreased 3% due to the Moerdijk auction shift softer performance at our Dubai auction partially offset by higher commissions earned from online GTV growth. On a rate basis we were pleased with our A&M service revenue rate performance in the second quarter coming in at 13.8% roughly 90 basis points higher than last year. The rate improvement was due to strong guarantee commission rate performance in both Canada and GovPlanet and in conjunction with fee revenue growth.
Moving on to our Auctions and Marketplaces segment inventory sales revenue the 32% growth in our inventory sales revenue was led by the U.S. region which was up 106% over last year primarily driven by the continued growth of GovPlanet surplus contract and increased inventory contracts at the live on-site auctions. As well we have seen a slight increase in distressed sale transactions and early signs of de-fleeting by some large strategic accounts in both the construction and transportation sectors. Our Canadian inventory sales revenue increased 11% primarily due to large equipment dispersals in the West during the quarter. Our international region was up 2% from increased inventory contracts in Japan and in Australia. On a rate basis our implied rate of return on inventory deals in the quarter was 8% which was roughly a 250 basis point sequential improvement from Q2 levels. The sequential increase in our rate was driven by disciplined inventory deal management as our sales and valuation teams navigated a very fluid pricing environment.
This increase was partially offset by some trailing effects from the remaining lower rate inventory in our international market which was anticipated and which has now been fully sold through. Overall we are encouraged with our sequential inventory rate improvement and strong rate performance from our guarantee contracts delivering at-risk rate performance which remains in line with historical levels and our expectations. Moving on to SG&A expenses. We continue to prioritize our cost initiatives. The 6% increase in SG&A over the prior year quarter was mainly driven by higher year-over-year incentive -- compensation due to improved financial results. Excluding this impact SG&A was only up low single digits compared to service revenue growth of 11%. Ongoing incremental GovPlanet costs investments in RBFS growth and the positive impact of foreign exchange fluctuations due to the devaluation in the euro and the Canadian dollar also affected our SG&A.
We are pleased with our overall sales force productivity which on a trailing 12-month basis was up 5% year-over-year in the third quarter. Turning to our balance sheet and liquidity metrics. Our operating cash flow of $309.1 million for the nine months ended September 30 improved 218% over last year. The improvement was driven by higher net income and improvements in working capital primarily resulting from a decrease in inventory balances. Additionally cash flow this quarter was favorably affected by the timing of auctions closer to the end of the quarter and the corresponding timing of receipts and disbursements. On a trailing 12-month basis our operating free cash flow increased 214% to $334.4 million. Our year-to-date capex spend of $25 million is currently tracking under our full year range for 2019 of $45 million to $55 million.
And with 1 quarter remaining we are now adjusting our full year 2019 capex guidance down to be between $35 million to $40 million. During the quarter we continued to reduce our long-term debt position with additional voluntary payments of $10 million along with a $4.5 million scheduled repayment. Our strong cash position the reduction in debt as well as a 17% increase in adjusted EBITDA on a trailing 12-month basis has resulted in an adjusted net debt to adjusted EBITDA ratio of 1.4x on a trailing 12-month basis which continues to be well below our evergreen target of less than 2.5x. On a trailing 12-month basis our ROIC increased to 8.6% up from 7.1% in the third quarter of 2018. Our overall financial position remains in very good health. Our clear strategic focus strong leadership across our business and a solid balance sheet give us continued confidence for the future.
And with that I'll now pass the call over to Karl.
Karl Werner -- Interim Co- Chief Executive Officer And President of International
Thank you Sharon and good morning everyone. To begin I'd like to echo Sharon's comments and highlight our U.S. region's strong performance delivering solid positive growth across both live and online channels. As discussed our third quarter live auctions were unfavorably impacted by the agriculture and energy sectors. Keeping that in mind that last year's energy comp is a tough one to follow as we had a major event with a large single customer dispersal. The shift in Moerdijk foreign exchange lower Middle East performance and trade concerns affecting exports to various markets have also affected our international business. While these factors affected our live auction performance this quarter we take them inside because issues were not structural. They were either market-driven and/or timing-related and are not indicative of our team's live auction execution in the quarter.
In fact when looking at our live auction comp performance. These issues did not affect the U.S. region which posted high single-digit live GTV growth and 58% of our auctions globally delivered solid wide comps. To name just a few of the standouts: Edmonton was up 27%; Orlando was up 54%; Japan and Australia up 36%; Sacramento up 19% in Atlanta Los Angeles up 42% and 30% respectively. I'd also be remiss if I did not mention our fantastic execution and record-breaking $77 million live auction in Houston earlier this week. As mentioned we are seeing some of the same of equipment which contributed to our overall unit growth with the U.S. driving a significant share of that. Particularly offsetting the unit growth was some price declines in older high-hour heavy equipment and transportation categories. Before I go on to online commentary I'd like to share some insights on priority bidding tool which we launched in the quarter. PriorityBid will replace our current RB pre-bid function which allows customers to place online bids up to a week before the event.
With PriorityBid already in use on IronPlanet this will give our customers a more consistent experience across platforms and allow customers more opportunity to place bids more often and provides us with insights into how items and categories may perform before the live auction. This also opens potential opportunities for marketing to intervene through direct campaigns if there are concerns of items underperforming. Turning to online performance. We had a strong quarter of online growth across all channels. 67% of our GTV was purchased by online buyers in Q3 versus 60% last year in line with our overall improving supply environment. We also saw strong incremental volumes through IronPlanet weekly including contributions from our large strategic accounts. One of our growth initiatives is Marketplace-E solution. Our objective here is to drive penetration of the midstream segment which we discussed previously as part of our strategic roadmap.
Our rapidly growing Marketplace-E offers consignors complete control over pricing time disposition through a variety of unreserved formats --- Marketplace-E offers consignors an alternative to selling their own or using brokers -- selling on their own or use of brokers and by achieving strong prices value through leveraging the RB platforms our global reach and network effects. We officially launched Marketplace-E in January of 2018. Since inception Marketplace-E has surpassed the $5 million mark in GTV. Marketplace-E has momentum right now and is fully embraced by our sales team as another capability to serve our customers' needs particularly those seeking control over a reserved platform. With Marketplace-E we are now attracting customers which in the past have not transacted with us. In fact through our customer data we are seeing that approximately 60% of our sellers on Marketplace-E and the last year have been new sellers to RBA or IronPlanet indicating that the channel is driving incremental new business. Marketplace-E is also giving us a beachhead for entering new international markets in an asset-light format and markets where there isn't the same level of comfort with an unreserved platform.
We are pleased with early strong momentum we are seeing and we'll continue to focus on scaling business attracting new customers as well as growing share of wallet with existing customers to capitalize on significant market share opportunities within the midstream segment. Turning now to our areas of focus in the fourth quarter. We are encouraged with the momentum we are seeing in our business. Over the last 2 quarters we remain acutely focused on executing our priorities as we move in the fourth quarter and into 2020. We are focused on what we control and that starts with sales execution leveraging our multi-channel platforms and driving overall sales productivity improvement. Our sales effectiveness initiative called SAGE was launched in Q2 and has now been fully cascaded to our sales teams. While we still take a few quarters to see real tangible outcomes we are already encouraged by early signs of engagement and adoption.
We remain firmly committed to our key growth drivers of expanding our base live and online auction businesses and accelerating our growth initiatives including Marketplace-E RB Asset Solutions Ritchie Bros. Financial Services growing our priority international markets and our government business. Together with Sharon and the entire executive team we have been committed to focusing on our people our customers and ensuring there's a high level of support and engagement as we progress through the CEO transition. Priority 1 right now is to ensure this transition process is seamless as possible while allowing our teams to stay focused on our business and be fully empowered to do the best each day. We've been in auction business for over 60 years. We've seen many inflections in cycles come and go.
It's times like these where our determination shows and that is when our customers consider the implications of possible economic slowdown they turn to us seek council on disposition auctions timing and strategies. That is where we excel that is where trust experience become the biggest asset position as well to support both buyers and sellers after driving them with our absolute best levels of service and commitment to continuously improve overall experiences. Finally we will continue to be focused on our expense discipline and driving incremental leverage into our business while maximizing our cash efficiency and operating free cash flow.
With that let me turn the call back to Sharon to close this out.
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
Thank you Karl. So to recap we are pleased that the execution of our multi-channel strategy is showing positive results and with just one quick comment on Karl's remarks that we have seen year -- in the two years since its inception with Marketplace-E over $500 million of GTV transacted on that form. And that we have delivered strong financial performance across all of our core metrics of GTV revenue operating income earnings per share. We also continue to make great strides toward achieving our evergreen model targets. Our online acceleration this quarter was very strong. And with all of our core solutions of IronPlanet weekly Marketplace-E and GovPlanet posting positive growth.
Our U.S. team delivered a solid performance with positive live and online GTV and very strong revenue growth. We continue to be very disciplined and are pleased with the strength of our balance sheet and our positive cash flow generation. Finally we are very encouraged with the continued momentum in our business and confident our multichannel strategy positions us well for continued growth and value creation. At the end of the day this is a people business. And we would like to thank our entire team for their energy and passion for serving our customers and driving value for our shareholders.
And with that we are ready to move to the Q&A portion of the call. Operator please open the line to questions.
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from Cherilyn Radbourne of TD Securities. your line is open.
Cherilyn Radbourne -- TD Securities -- Analyst
Thanks very much, and good morning. I wanted to ask about what feels like an ongoing shift to lower value lots just curious whether that's principally the influence of GovPlanet? Or whether that's a trend that you're also seeing across the live auctions and online marketplaces?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
Cherilyn it's Sharon. I'll take that. So certainly GovPlanet is an impact that is a channel that has very low kind of item prices. So that's very similar to our tower auctions at our live events. But we equally are still seeing the age of equipment is still tending to kind of the lower -- not later models but it's not in our sweet spot the way we would like it to be. So that is also having an effect. So it is being seen in our live events as well. And as we again continue to expand our capabilities in that small sector and in transportation we do start to see downward pressure on our average sale price per lot.
Cherilyn Radbourne -- TD Securities -- Analyst
And how do you feel about that strategically? Because I understand that lower value items attract higher fees and that's positive for the revenue rate. But I assume that there's also more competition to sell lower value items versus higher value items?
Karl Werner -- Interim Co- Chief Executive Officer And President of International
Cheril This is Karl. We get a lot of those in packages of equipment. So mix constantly changes. It's a balance for us. And we don't see -- the competition is mainly on the large packages and those are just a component of those.
Cherilyn Radbourne -- TD Securities -- Analyst
Okay. Fair enough. And then just on SG&A you had some nice leverage there this quarter. Just wondering whether there was anything we should be mindful of as we model like lower stock-based compensation or anything of that nature?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
So no we were very pleased with the discipline that the teams showed in their SG&A spending. It's clearly things like travel and promotional costs were very well-managed in the quarter. The compensation expense is the primary driver of what you're seeing in Q3 is really related to variable based performance where we are seeing strong performance in our financial results compared to where we were last year. So it's -- I don't think there's anything particularly unusual for you to be considering. I do probably just would call out that there is currently a positive foreign exchange impact on our SG&A as we translate our international and Canadian offices into U.S. dollar currencies.
Cherilyn Radbourne -- TD Securities -- Analyst
Thank you. Those are my questions.
Operator
Your next question comes from Derek Spronck of RBC Capital Markets. Your line is open.
Derek Spronck -- RBC Capital Markets -- Analyst
Okay, thank you for taking my questions. It was another quarter of pretty high inventory sales. Do you think this is going to be more of the trend going forward here? And the margins seem to be a little bit more compressed than it has been historically. Is that correct? And if so are there any levers that you can pull to maybe change that dynamic?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
Sure. So I'll tackle that. We're somewhat agnostic to the form at which our contracts are written. And it really is up to consignor demand in terms of whether or not we take something as a straight commission a guaranteed commission contract or an inventory position. The things that will cause inventory to fluctuate positively will be increases in insolvency transactions increases in our international business because those are the areas that really where you do need to take title to the assets to basically complete those transactions. So I think unfortunately this is the new accounting standard. So you see the variability which is why we've been recommending that from a revenue standpoint the performance of our service revenue line is more indicative of our overall growth and health of our business.
On the margin query we do earn fees and other service revenues and those don't show up in that pure gross profit measure that you're really seeing on the face of the statements. Overall we go back to our overall at-risk performance. We are very much in line with our historical levels and clearly on our expectations with respect to both performance of inventory contracts and our guarantee contracts. So we're very pleased particularly in light of -- right now what we're seeing is a very fluid and dynamic pricing environment. Our teams have done a very good job of ensuring they're looking forward to where prices are going to be as we price out those at-risk contracts.
Derek Spronck -- RBC Capital Markets -- Analyst
Okay. No that makes sense Sharon. And just one more for myself if I could and then I'll turn it over. There's been obviously multiple different areas and segments that are delivering growth. Are there any particular areas or segments that you are most optimistic about in terms of providing growth in the next one to two years?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
So I think we're very encouraged with what we see in the U.S. and that really has been a tailwind for us for the last few years were just related to equipment supply. So I'd say that that -- clearly what we're seeing in the quarter and the discussions that the U.S. team and the sales teams are having with their customers give us some degree of comfort that the current trend may not continue at that rate but it actually looks like those tailwinds to supply have really abated. So we are quite keen on the progress that the U.S. team has made. And in addition are the 2 key drivers of performance being our SAGE sales kind of effectiveness program and Marketplace-E we're really pleased with how we're seeing that particularly the U.S. team adopting those concepts to provide better value to our consignors as well as sales force.
Derek Spronck -- RBC Capital Markets -- Analyst
Okay, thanks
Operator
again, if you would like to ask a question, press star then the number one on your telephone keypad. [Operator Instructions] Your next question comes from Ben Cherniavsky of Raymond James. your line is open.
Ben Cherniavsky -- Raymond James -- Analyst
Sorry I'm still trying to completely understand the different revenue reporting that's changed since you -- since the accounting policies were changing you couldn't just report it in a simpler fashion the way you used to. So the -- when I look at the other revenue that you reported does that all fall into the fee bucket? Is all other revenue or fees -- what or ask another way what exactly does that represent the other revenue?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
So yes. So I assume you're referring to the other segments or the other classification which is made up of other segments. So what's predominantly in there is Ritchie Bros. Financial Services Mascus which is listing fee revenues and hosting fee revenues in RBAS as well as ancillary- and refurb-type revenues that are related to the equipment that comes into the transaction -- transactional sites but is not related to the auction. So what you would have seen as we've got very good growth in Ritchie Bros. Financial Services. We see -- are seeing some good growth in Mascus and RBAS. But a lot of the inventory that we sold through this quarter. The -- the work that had been done on that for refurb paints etc. have been done in prior quarters. So you're seeing some declines in those ancillary revenue but it's purely because of timing in the network has performed.
Ben Cherniavsky -- Raymond James -- Analyst
But it's all -- but that is all classified as -- none of those commissions right -- that all fall -- all the other revenue as you described it would be fee based revenue?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
Yes it's all in the fee bucket.
Ben Cherniavsky -- Raymond James -- Analyst
And other services include Ritchie Brothers the RBAS right?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
Yes. RBAS Mascus.
Karl Werner -- Interim Co- Chief Executive Officer And President of International
Logistics.
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
Logistics costs
Karl Werner -- Interim Co- Chief Executive Officer And President of International
Refurbishers.
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
Our appraisal asset services group it's a mix of a lot of service-related fees that we actually do outside of our auction fee structures.
Ben Cherniavsky -- Raymond James -- Analyst
Right. I guess what I'm trying to back in to here Sharon is what the -- because I know there's also been some fee harmonization. And I'm trying to figure out how material that was in the quarter or year-to-date?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
So the fee -- yes so the fee harmonization is not in the other sector. It's in auctions and marketplaces fee structure. And it was a large driver of total fee growth of 19%. And the 2 real factors the current year harmonization but also what we're seeing is this increase in small lots that you're getting year-over-year benefit not just from this year's harmonization but the fee implementation from last year. And to build on Cherilyn's point those fees are essential for us to be able to make money on those small lots and make it more -- make it a more viable kind of part of our solution and it is definitely working. And without having impact to what we see as price realization rates or impact to our customers.
Ben Cherniavsky -- Raymond James -- Analyst
Right. So you're saying that there's also a mix component to it? As the lots get smaller you start imposing fees that aren't imposed on larger lots. And that will drive some of that revenue growth?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
I would put it a bit differently Ben. I think it's just because on small lots they don't hit the cap. So as a result the percentage of the GTV ends up higher on a rate basis even though the dollars may actually be small on small lots is that they're not -- they just haven't hit the cap level.
Ben Cherniavsky -- Raymond James -- Analyst
Right. Okay. And then you did make one reference to the evergreen targets but I realize you're in transition to some new leadership. And I don't know maybe those will be revisited. But -- and then I think I've asked this in past quarters ROIC improved but you're still roughly half of what your target is in two years? Do you still think that's achievable 15% in 2021?
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
So we do look at that. We've done our planning out. All our models indicate that evergreen target is still very much achievable through a combination of continued reduction in debt and earnings growth.
Ben Cherniavsky -- Raymond James -- Analyst
Okay, thanks very much as my question.
Operator
And that was our final question. I will now return the call to Mr. Mawani for final comments.
Zaheed Mawani -- Interim Co- Chief Executive Officer And President of International
Thank you Chris and thank you to everyone for joining us on our third quarter call. And we look forward to speaking with you again on our fourth quarter call in New Year. Have a great day everyone. Bye-bye. That concludes our call.
Operator
[Operator Closing Remarks]
Duration: 38 minutes
Call participants:
Zaheed Mawani -- Interim Co- Chief Executive Officer And President of International
Sharon R. Driscoll -- Interim Co- Chief Executive Officer And Chief Financial Officer
Karl Werner -- Interim Co- Chief Executive Officer And President of International
Cherilyn Radbourne -- TD Securities -- Analyst
Derek Spronck -- RBC Capital Markets -- Analyst
Ben Cherniavsky -- Raymond James -- Analyst
